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Natural gas prices likely won’t affect local plant

Chester Champagne (left) and Beau Rousseau work June 28 at the power plant in Houma.

Abby Tabor/Staff

Xerxes A. WilsonStaff Writer

Published: Sunday, July 8, 2012 at 6:01 a.m.

Last Modified: Saturday, July 7, 2012 at 4:13 p.m.

Though natural gas prices are at near historic lows, the Houma Power Plant isn’t likely see significant increase in use as a result.

Terrebonne Director of Utilities Thomas Bourg said factors beyond the economics of natural gas prices complicate the use of the aging power plant though customers will see some benefits from low prices.

The Houma Power Plant in its current form was built in the 1960s as part of what Bourg called the “Houma Power System.” This system serves about 13,000 customers in Houma and the surrounding urban areas.

The Houma System also uses power from the Southwestern Power Administration, an agency of the Department of Energy that markets hydroelectricity to public municipalities, and the Bain Energy Center, a coal-fired power station near Lena.

Bourg said the Bain Energy Center has provided the bulk of the area’s power for the past five to 10 years as it has typically been the cheapest source. The Houma plant provided about 10 to 20 percent of the power for the same period while purchases from the open market made up more than a third of usage.

Purchasing electricity off the open market is typically more cost effective than running the plant, Bourg said. So the current low levels of natural gas prices don’t have as great an impact as if the plant were the area’s primary source for power.

These open market purchases are from other energy services corporations and typically originate from facilities being able to generate more power than required for their needs. They sell part of their plants’ output on the market, typically for attractive rates, Bourg said.

“Even if we can produce at (current natural gas prices), if it were not the absolute dead of summer, we could probably find more effective market resources,” Bourg said.

Bourg said it’s very rare for natural gas prices to be low enough to make running the Houma plant more cost effective than receiving energy from the open market or through the Bain Energy Center.

Instead, infrastructure and the supply of open market energy has typically put the plant in use for a minority share of the system’s power, he said.

Bourg said the plant has been in use through parts of the spring as the early summer heat caught many facilities still making spring repairs in preparation for the “summer run.”

Bourg also said transmission constraints restrain the availability of open market power.

But the cost of producing the portion of the system’s power at the plant has dipped with the low natural gas prices leading to reductions on customers’ fuel service charge on their power bills, Bourg said.

“That 20 percent or so (produced at the Houma plant), at present can’t be replaced with market power and can have a dramatic impact on our overall cost if costs for natural gas are low,” Bourg said.

Allan Pulsipher, executive director of the Center for Energy Studies at Louisiana State University, said natural gas prices are at “almost historical lows and likely to stay there. It is great news for anybody who is not in the natural gas industry. Five years ago, natural gas was selling for $10 a million cubic feet. Now it is at $2. No other major commodity has seen that.”

Pulsipher said a combination factors have led to a glut in the supply of natural gas in the United States. He noted new developments in shale gas, which is gas trapped in rock formations, have contributed significantly to the low price.

Pulsipher also said abnormally warm winters have left the natural gas storage facilities full and thus prices remain low.

“There are a lot of factors that have resulted in very ample natural gas supplies,” Pulsipher said. “You never know what is going to happen. I can’t see anything on the horizon that is going to change that.”

Bourg noted Houma’s plant isn’t overly inefficient, but its age affects its reliability.

Terrebonne officials are planning a new source of power though it likely won’t fully replace the Houma plant, he said.

The new, $100 million facility is part of a 10-city collective effort to build a so-called combined cycle generator that will be fueled by natural gas, but uses the exhaust from a combustion turbine to heat a traditional steam boiler that will also be supplemented with natural gas.

This is like two separate power plants working in unison, thus creating far more efficiency, Bourg said.

Bourg said the plant is in the design phase and will not serve as a replacement to the Houma plant because Houma’s share of the new plant’s production cannot match the capacity available at the old plant.

<p>Though natural gas prices are at near historic lows, the Houma Power Plant isn't likely see significant increase in use as a result. </p><p>Terrebonne Director of Utilities Thomas Bourg said factors beyond the economics of natural gas prices complicate the use of the aging power plant though customers will see some benefits from low prices. </p><p>The Houma Power Plant in its current form was built in the 1960s as part of what Bourg called the “Houma Power System.” This system serves about 13,000 customers in Houma and the surrounding urban areas.</p><p>The Houma System also uses power from the Southwestern Power Administration, an agency of the Department of Energy that markets hydroelectricity to public municipalities, and the Bain Energy Center, a coal-fired power station near Lena.</p><p>Bourg said the Bain Energy Center has provided the bulk of the area's power for the past five to 10 years as it has typically been the cheapest source. The Houma plant provided about 10 to 20 percent of the power for the same period while purchases from the open market made up more than a third of usage.</p><p>Purchasing electricity off the open market is typically more cost effective than running the plant, Bourg said. So the current low levels of natural gas prices don't have as great an impact as if the plant were the area's primary source for power. </p><p>These open market purchases are from other energy services corporations and typically originate from facilities being able to generate more power than required for their needs. They sell part of their plants' output on the market, typically for attractive rates, Bourg said. </p><p>“Even if we can produce at (current natural gas prices), if it were not the absolute dead of summer, we could probably find more effective market resources,” Bourg said.</p><p>Bourg said it's very rare for natural gas prices to be low enough to make running the Houma plant more cost effective than receiving energy from the open market or through the Bain Energy Center.</p><p>Instead, infrastructure and the supply of open market energy has typically put the plant in use for a minority share of the system's power, he said. </p><p>Bourg said the plant has been in use through parts of the spring as the early summer heat caught many facilities still making spring repairs in preparation for the “summer run.”</p><p>Bourg also said transmission constraints restrain the availability of open market power.</p><p>But the cost of producing the portion of the system's power at the plant has dipped with the low natural gas prices leading to reductions on customers' fuel service charge on their power bills, Bourg said.</p><p>“That 20 percent or so (produced at the Houma plant), at present can't be replaced with market power and can have a dramatic impact on our overall cost if costs for natural gas are low,” Bourg said.</p><p> Allan Pulsipher, executive director of the Center for Energy Studies at Louisiana State University, said natural gas prices are at “almost historical lows and likely to stay there. It is great news for anybody who is not in the natural gas industry. Five years ago, natural gas was selling for $10 a million cubic feet. Now it is at $2. No other major commodity has seen that.”</p><p>Pulsipher said a combination factors have led to a glut in the supply of natural gas in the United States. He noted new developments in shale gas, which is gas trapped in rock formations, have contributed significantly to the low price. </p><p>Pulsipher also said abnormally warm winters have left the natural gas storage facilities full and thus prices remain low.</p><p>“There are a lot of factors that have resulted in very ample natural gas supplies,” Pulsipher said. “You never know what is going to happen. I can't see anything on the horizon that is going to change that.”</p><p>Bourg noted Houma's plant isn't overly inefficient, but its age affects its reliability.</p><p>Terrebonne officials are planning a new source of power though it likely won't fully replace the Houma plant, he said.</p><p>The new, $100 million facility is part of a 10-city collective effort to build a so-called combined cycle generator that will be fueled by natural gas, but uses the exhaust from a combustion turbine to heat a traditional steam boiler that will also be supplemented with natural gas.</p><p>This is like two separate power plants working in unison, thus creating far more efficiency, Bourg said.</p><p>Bourg said the plant is in the design phase and will not serve as a replacement to the Houma plant because Houma's share of the new plant's production cannot match the capacity available at the old plant.</p>